In Zurich Insurance plc v Maccaferri Limited the Court of Appeal was asked to determine whether there had been a breach of a condition precedent in a combined public and products liability policy which stated that the insured must give notice “as soon as possible after the occurrence of any event likely to give rise to a claim.”
The insured, Maccaferri, had supplied a “Spenax gun” to a builder’s merchant who in turn hired it out to a construction company. On 22 September 2011, there was an accident involving the gun and an employee of the construction company lost sight in one eye.
Maccaferri became aware of the incident on 28 September 2011 but was not given details and did not know that there had been a serious personal injury. By 12 January 2012 it was aware there was an injury, but was not informed of allegations that the gun was faulty.
On 12 July 2013, Maccaferri received a Part 20 claim against it and notified Zurich that same day.
Zurich declined indemnity and advised Maccaferri that there had been a breach of the condition precedent.
Zurich’s position was that Maccaferri should have given notice when it became aware of the event, and that it was likely to give rise to a claim, or when it ought to have become so aware.
The Court of Appeal disagreed and stated that the question asked by the clause was whether, when the event occurred, it was likely to give rise to a claim.
To find otherwise would have placed Maccaferri in the position of having to undertake a “rolling assessment” as to whether a past event was likely to give rise to a claim, which was not the wording used.
Lord Justice Christopher Clarke commented: “This is a condition introduced by Zurich into its policy which has the potential effect of completely excluding liability in respect of an otherwise valid claim for indemnity. If Zurich wished to exclude liability it was for it to ensure that clear wording was used to secure that result. It has not done so.”
“There are clauses which have that effect, particularly in claims made policies insuring against professional liability, but they are not in this form. If that was what was intended, the insurers could be expected to have spelt it out.”
The court confirmed that “an event likely to give rise to a claim” meant that a reasonable person would have thought it was at least 50% likely that a claim would be made.
In this instance: “It was a possibility, but not more, that the accident involved a fault in the gun. But there were other possibilities: a fault in the way in which the gun was used, or no fault at all….A possibility of a claim is not enough.”
As the clause was constructed, the court found that there had been no breach.
This case therefore acts as an important reminder to insurers that, in light of the serious consequences for an insured, any clause which they might wish to rely upon to exclude liability must be properly drafted and unambiguous as to its meaning.